22 September 2017

U.S. Trade Gap Widens

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The U.S. trade gap widened sharply in August, suggesting trade will weigh on economic growth in the third quarter as a strong dollar and a slowdown overseas curb demand for U.S.-made goods. The trade gap with other nations grew 15.6% to a seasonally adjusted $48.33 billion in August, the Commerce Department said Tuesday. That was narrower than the $48.5 billion deficit projected by a Wall Street Journal survey of economists.

The gap reflected a drop-off in exports, due in part to lower oil prices, along with rising imports of consumer goods such as cellphones, toys and apparel. Imports climbed 1.2%, while exports fell 2% to their lowest level since October 2012.

Trade figures ebb and flow from month to month. Broader trends suggest international trade has slowed due to weak global growth. The U.S. trade deficit grew 5.2% from January to August compared with the same period a year earlier. Exports fell 3.8% over that period while imports declined 2.2%, reflecting lower oil prices and economic woes overseas.

Separate Commerce Department data out recently also showed headwinds for American industry, with orders for durable goods falling in August. Another gauge of manufacturing activity from the Institute for Supply Management fell to its lowest level in more than two years in September, and suggested exports will remain soft.

Exports plunged in the first quarter as the labor dispute snarled ports activity, then bounced back strongly in the second quarter. Exports bolstered economic growth in the years following the recession but have been choppy in recent months as the fallout from the European debt crisis and slower growth in Asia damped demand for U.S. goods.

Also, efforts by central banks to stimulate their economies have pushed up the value of the dollar against other currencies, effectively making U.S. goods more expensive abroad while boosting American consumers’ purchasing power.

Goods exports in August were the lowest since June 2011, as exports of industrial supplies and materials—a category that includes oil—fell to their lowest level in nearly five years. The average import price of a barrel of crude oil fell in August, after rising for the previous four consecutive months, according to the report. But other goods and auto exports also fell sharply, and the capital goods category rose only because of a spike in aircraft shipments.

Meanwhile, exports of services, such as financial services, education and travel, were the highest on record in August. The trade gap has also fueled opposition to a sweeping free-trade deal known as the Trans-Pacific Partnership. The U.S., Japan and 10 other countries around the Pacific said Monday they had reached a deal to lower trade barriers to goods and services, an announcement the Obama administration said would open new markets to American products.

Congress still needs to approve the deal, but only a handful of Democrats support Mr. Obama’s trade policy. Some U.S. industries and unions are concerned the agreement could open up the U.S. market to further competition from companies abroad.

Click here to access the full article on The Wall Street Journal.

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